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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS. NO.453 of 2006
BETWEEN
TED TARU
First Plaintiff
AND
ELSIE TARU
Second Plaintiff
AND
PACIFIC MMI INSURANCE LIMITED
First Defendant
AND
DAVID RANDLE
Second Defendant
AND
HENRY SMITH
Third Defendant
Waigani: Kandakasi, J.
2014: 03rd June
2016: 30th May
MEDIATION – Mediated agreement – Competing applications, one to enforce mediated agreement and another to set aside - Application to set aside – Claims of intimidation, duress, acceptance of strictly legal arguments and denial of others – Lack of clear identification and or statement of facts forming basis for allegations and lack of evidence – Evidence adduce mainly submissions, arguments, opinions and conclusions without supporting facts – Objection upheld - No clear statement of the legal arguments or points and demonstration of likelihood of being upheld in favour of party raising them – Relevant possible legal points or arguments in the case - Not likely to be determined in favour of party complaining – Application to set aside mediated agreement dismissed – Application to enforce – Failure of application to set aside – Effect of – No impediment to enforcement of – Orders enforcing mediated agreement granted.
MEDIATION - Confidentiality - Rule 13 of ADR Rules – Application of Rule – There must first be a clear statement of
facts and evidence against which the rule may apply – Lack of - No need for consideration and application of the rule –
Importance of existence of the rule – Parties right to refuse to sign agreements for good reason – Failure to –
Meaning and effect of – Need to protect court annexed mediation process – Application of finality in litigation principle
- Written agreement valid and enforceable – Rule against extrinsic evidence and Rules 11, 12 and 13 of the ADR Rules could
operate against adducing of evidence other than the agreement itself.
MEDIATION - Bad faith in – Consequences of – Court could stay proceedings until all costs paid or final judgment against
defaulting party – Where mediation proceeds to settle case despite bad faith agreement enforceable subject to valid contract
and or valid basis for set aside tests – Bad faith directed at lawyer on breach of undertaking – Subject to hearing the
lawyer judgment could be entered against the lawyer.
Papua New Guinea Cases cited:
Emas Estate Development Pty Ltd v. John Mea & Ors [1993] PNGLR 215.
Hargy Oil Palm Ltd v. Ewasse Landowners Association Inc (2013) N5441.
Kerry Lerro v. Philip Stagg, Valentine Kambori & Anor (2006) N3050.
Mekere Morauta v Aloysius Eviaisa (2002) SC685.
Mount Hagen Urban Local Level Government v. Sek No. 15 Ltd (2009) SC1007.
Mudge v. Secretary for Lands [1985] PNGLR 387.
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126.
Rage Augerea v. The Bank South Pacific Ltd (2007) SC869.
Shell Papua New Guinea Ltd v. Speko Investment Limited and Peandui Koyati (2004) SC 767.
Legislation and other material cited:
Rules Relating to the Accreditation, Regulation, and Conduct of Mediators 2010
Counsel:
B. Ovia, for the Plaintiffs
K. Imako and M. Tumul, for the Defendants
30th May, 2016
1. KANDAKASI J: On 23rd April 2014, the parties went to mediation and arrived at a mediated agreement. Before me are two notices of motion one filed by the Plaintiffs, Ted and Elsie Taru (the “Tarus”) and another by the Defendants, both filed on 28th May 2014 also. The Tarus are seeking a set aside of the mediated agreement while the Defendants are seeking its enforcement under Rule 12 of the ADR Rules. The Tarus in their submissions claim duress and acceptance of strict legal arguments by the mediator and intimidation by the Defendant’s lawyers at the mediation. The Defendants deny the Plaintiffs claims.
Relevant Issues
2. The specific issues this Court must consider and determine are:
(1) Have the Plaintiffs made out their claims as against the mediator of duress and acceptance of strict legal arguments?
(2) Have the Plaintiffs made out their claims of intimidation by the Defendants at mediation?
(3) If the answer to either or both of the 1st and 2nd questions is in the affirmative are they sufficient to warrant a set aside of the mediated agreement?
(4) Subject to answers to questions (1), (2) and (3), have the parties reached an agreement at mediation that is enforceable under Rule 12 of the ADR Rules?
Relevant Factual Background
3. The relevant background facts giving rise to these issues and this proceeding are these. Until his termination on 16th January 1998, Niugini Insurance Corporation (NIC) employed the first Plaintiff, Ted Taru. Under a home ownership scheme provided by NIC to its employees, the Tarus bought a residential property. The property was a State Lease consisting and described as Section 40, Allotment 9, Papua Place, Boroko, National Capital District (the property). The NIC, lent the Tarus K90, 000.00 toward the purchase price, under its home ownership scheme. In return, the Tarus gave and the NIC had a registered mortgage over the property as security for the repayment of the loan. In their statement of claim, the Tarus claim that upon and after the termination of Mr. Taru’s employment, NIC did nothing about the loan and mortgage.
4. The Tarus claim that in 2000, the first Defendant, Pacific MMI Insurance Limited (Pacific MMI) and the second Defendant David Randle (Mr. Randle) through their servants and agents fraudulently sold the property to the Third Defendant, Henry Smith (Mr. Smith). As at the time of the sale, the Tarus claim, the property was valued at K600, 000.00 and had K200, 000.00 in personal effects. They go on to claim that Pacific MMI did not have any legal or equitable right in the property and did not have any authority from the NIC to sell the property. This they claim resulted in the loss of their property, their personal effects, possible rental income at the rate of K1, 950. 00 per month and K40, 000.00 in repayments they made on the loan. By way of relief, they are claiming a reversal of the title in the property to themselves and other consequential orders. This does not acknowledge the fact that, there has been two more transfers of the property after the initial transfer to Mr. Smith. The first one was by Mr. Smith to a Family Federation For World Peace and Unification Inc. and from that Federation to a Giorgio Boin on 18th May 2012.[1]
5. By orders of the Court on 22nd May 2007, Mr. Randle was removed as a party in this proceeding. That left the claim only as against the Pacific MMI and Mr. Smith, who has taken no active step in this proceeding. This may be due to the fact that he sold the property to Family Federation For World Peace and Unification Inc. Neither that entity nor Giorgio Boin has been named and served with the proceedings.
6. In defence filed for the Pacific MMI on 27th November 2007, with leave of the Court and with support of affidavits filed for the Defendants, the Defendants plead that the Tarus claim is res judicata. This is based on an order of the National Court made on 11th April 2000 requiring the Tarus to give vacant possession in proceeding OS No. 31 of 2000. The Pacific MMI took out that proceeding to secure vacant possession to complete the sale and transfer to Mr. Smith. An appeal lodged by the Tarus on 19th May 2000 referenced SCA No. 36 of 2000 was also resolved against the Tarus when they had it withdrawn in response to an application seeking to have the appeal dismissed for want of prosecution. Further, the Defendants plead that, Mr Taru on behalf of both himself and his wife, signed a Deed of Release in favour of the NIC and the Independent Public Business Corporation (IPBC) which subsequently got vested with the assets and liabilities of NIC. By that deed, the Tarus released both NIC and the IPBC in respect of claims for his unlawful termination and loss of personal properties and personal effects. In return for that release, the Tarus’ received a payment of K83, 945.92 in full and final settlement of their claims. Additionally, the Defendants plead that, NIC exercised its powers as mortgagee and sold the property to Mr. Smith. The relevant contract of sale and other documents were executed by authorized officers of the NIC under the corporations seal. By reason of this the Defendants deny the Tarus claim of fraudulent sale of the property. Based on their pleadings and with the support of a number of affidavit material, the Defendants filed a notice of motion on 21st February 2014, seeking a dismissal of the proceedings.
7. On 7th June 2013, Her Honour Justice Davani issued orders directing the parties to resolve this proceeding through mediation. I was initially appointed as the mediator. Unfortunately, my own schedule did not permit me to conduct the mediation. Given that and with the agreement of the parties, fully accredited external mediator Callum Campbell and Mrs. Assaigo-Kami, a provisionally accredited mediator were appointed to conduct the mediation. The parties also agreed to pay the external mediators fees and have the mediation conducted on 23rd and 24th of April 2014.
8. On 23rd April 2014, the mediation commenced as scheduled. In attendance were Mr. Ovia of Ketan Lawyers with the Tarus themselves for the Tarus. For the Pacific MMI were a Mr. Andrew Gogo, the Claims and Underwriting Manager of the Pacific MMI with their lawyers, Messrs Imako and Tumul. The mediation process concluded on the same day with a mediated agreement signed by the Tarus and Pacific MMI. On 25th and 28th April 2014, the Tarus issued a complaint letter against Mr. Campbell and had it delivered to Mrs Jean Kila-Kalamo of the ADR Centre.
9. Prior to the commencement of the mediation, Pacific MMI paid its share of the external mediator’s fees even though it had
a very short time to do so. On the other hand, the Tarus have not to date paid their share of the external mediator’s fees
even though they through Ketan Lawyers undertook to do so and on the basis of which the mediation commenced and concluded as it did
on 23rd April 2014. The mediated agreement was for the Tarus to discontinue this proceeding within seven (7) from the date of the mediated
agreement and pay the defendants costs on a party/party basis. The mediator’s certificate, filed in accordance with the ADR Rules confirms the settlement in those terms. Despite, the mediated agreement, the Tarus failed to discontinue this proceeding. They also
failed to pay their share of the external mediator, Mr. Campbell’s fees despite their lawyer’s undertaking. On the basis
of that failure, the mediator issued a bad faith certificate against the Tarus’ lawyers.
10. When the matter returned from mediation, Pacific MMI sought to have the proceedings finalized in accordance with the mediated
agreement, which the Tarus objected. Consequentially, the Court directed and the parties filed their respective formal applications
by way of the motions now before the Court. In particular, the Tarus were directed to file affidavits detailing their claim of duress,
strictly legal arguments being accepted by the mediator and intimidation at and during the mediation process respectively against
the mediators and the Defendants lawyers. That resulted in the filing of the two different motions now before the Court with their
supporting affidavit material. For the Tarus are the affidavits of Buri Ovia and Ted Taru both sworn on 21st and filed on 28th May 2014. For the defendants is the affidavit of their lawyer, Kenneth Imako sworn on 27th and filed on 28th May 2014.
11. Without more, the affidavit evidence for the Tarus make general statements such as the following from Mr Taru’s affidavit:
(a) “The mediation was rushed and gave my wife and I very little time to think properly because I was under pressure from the mediators in making very quick presentations in the meeting sessions.”[2]
(2) “there was ... a lot of intimidation from the Defendant’s Lawyers.”[3]
(3) “... I was disturbed by the mediation team’s interjections at times, supporting the Defendants on issues of contention which I feel was very unfair and caused us to forget or hold back some very critical aspects of our presentation and so I believe I have been treated unfairly.”[4]
(4) “... with the rushed sessions I had very little time to think and strategize our presentations. I was forced to concede defeat even when I still had a lot of contentious issues to discuss.”[5]
(5) “There were serious issues I could raise because the mediator kept taking us back to the Asset Sales Agreement and the Deed of Release. There are serious issues pertaining to the Asset Sales Agreement which I set out below.”[6]
(6) “Regrettably, I must say that I am very disappointed with the outcome of this mediation and whilst I agree to discontinue the matter, this was done under much duress.”[7]
(7) “We were also told in no uncertain terms by the mediator that there was no way we could be successful if the matter proceeded to trial and according to him (mediator), that may be the reason why the matter was referred for mediation so as to avoid unnecessary costs.”[8]
12. Pacific MMI objects to the Tarus and their lawyer Mr. Ovia’s affidavit on two main grounds. The first is under Rule 13 of the ADR Rules and the second one for being opinions, submissions and arguments. Those falling under the first ground are paragraphs 3 - 5 of the affidavit of Buri Ovia and paragraphs 5, 8 -18 and 20 of the affidavit of Ted Taru. For those under the second ground are paragraphs 8 - 12, 14, 17, and 18 of the affidavit of Ted Taru and paragraphs 4, 6, 17, 22, and 23 of the affidavit of Ted Taru.
13. Through its lawyer Mr. Imako, Pacific MMI denies the Tarus’ claims and says the mediator and his co-mediator ran the mediation
well and did so professionally. That led to the agreement the parties reached at the end of the process. No pressure or duress
of any sort were exerted against the Tarus’ and their lawyers. Similarly, Pacific MMI denies the Tarus’ claims of intimidation
from their lawyers as against the Tarus’ and their lawyers. Its evidence and position is simply that the Tarus participated
and signed the mediated agreement freely and of their own choice. They are thus bound by their own agreement.
Issues 1 & 2 - Legal points, intimidation, duress, rush etc..
14. I now turn to a consideration of the issues before me. The first two questions are dependent on the facts and what as a matter of law the Tarus’ had to establish to succeed. These questions will thus be dealt with together.
15. In respect of these questions, the Tarus have not been specific in their claims and in their evidence. As noted in paragraph 15 above, the Tarus claims are too general. In order to render their claims credible they had two obligations to discharge. The first was to state succinctly the relevant facts which forms the foundation for their allegations or claims. The second was an obligation to produce the relevant evidence substantiating the allegations. It is well accepted in our jurisdiction that, he who alleges something against another must first plead or state the relevant facts with sufficient particulars. This is necessary to enable the persons against whom a claim is made to consider and either admit or deny. This position is abundantly clear in the context of pleading a cause of action. There, the law is, a failure to so plead comes with the risk of the allegations being dismissed and judgment entered for the opposing party. The legal position governing applications for summary determination of proceedings clearly bring out the relevant principles.
16. In Kerry Lerro v. Philip Stagg, Valentine Kambori & Anor,[9] I summaries the relevant principles (with the subsequent endorsement of the Supreme Court[10]) and said these about pleadings with sufficient particulars:
“...A statement of claim or a defence (as the case may be) must therefore clearly plead the form of action by pleading the necessary legal elements or ingredients of the action and relevant and necessary facts (not the evidence) giving rise to the form of action... It follows therefore that, where a statement of claim or a defence is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings, which would enable the real issues to be identified, ... and instead leaves it to guess work, it should be struck out....”
17. It is also settled law that affidavits, must only set out facts. The Evidence Act (Chp.48) which allows for evidence to be adduced into Court by affidavits, in ss. 34 and 35 speak only in terms of facts. There is no provision for witnesses to express their opinion, make an argument or express a conclusion on any issue before the Court. These are matters for the Court and before that for counsel to raise in their submissions. But even then, the opinions, arguments and or conclusions must be based on or supported by evidence. Only expert witnesses may be permitted to express their professional opinions based on their professional training, skill and experience and their examination or tests and observations of certain primary factors or evidence as in the case of personal injuries or a claim requiring technical expert evidence.
18. In these case, the affidavits filed for the Tarus fail to set out the relevant facts and produce evidence sufficient to form the basis for their allegations. The statements allegedly made are not stated in the first person by way of a direct quotation of the words used by the mediators or counsel for Pacific MMI. Similarly, there is no clear description of what exactly was said or done against the Tarus. Additionally and more importantly, no facts or any particulars are given from which these allegations have been formulated or arrived at. Clearly these are broad allegations without any factual foundation. Hence, nothing further can be said or should be allowed to turn on these allegations. Specific questions for example, what exactly was said or done, in what way and manner, against whom by who, where, at what point in time or stage of the mediation was it said or done and why and or what gave rise to what was said or done, beg answers. Further, there is also the question of what did the Tarus or their lawyers do to counter act against the matters alleged. For instance, what did they do to ask the mediators to slow down and give them some time and opportunity to think things through? If they did, what were the mediators’ response? If all or most of these questions were answered they would have given us some foundation to work out whether any of the matters in the allegations did occur.
19. Additionally, I note that the words “intimidate” and “duress” are used. These words are familiar to most people in the law. Both, could jointly or on their own amount to either a criminal or civil wrong or both. The word “intimidate” is defined in terms of an unlawful intentional act that coerces, forces or frightens somebody into doing or not doing something against his or her will, for example by means of violence or blackmail or force someone to give money by threat of violence.[11] The word “duress” has a similar meaning or effective. Like intimidation, duress exerts pressure, force, threat, coercion or compulsion to cause somebody to do something he or she does not want to do.
20. As counsel for Pacific MMI points out, judicial expression of this in PNG is found in the decision of the Supreme Court in Sir Mekere Morauta v Aloysius Eviaisa.[12] There the Supreme Court drawing from Halsbury’s Laws of England stated:
“Duress refers to compulsion under which a person acts through fear of personal suffering or confinement, actual or threatened (9 Halsbury’s Laws, 4th Edn` para 297). Intimidation exists where a person is coerced by unlawful threats into doing or abstaining from doing something that he would otherwise have every right to do (Fleming, The Law of Tort, 6th Edn, page 659).”
21. In the present case, the relevant question is. What was it that the mediators or the representatives of Pacific MMI did or said that amounts to intimidation and duress against the Tarus which caused them to arrive at the mediated agreement? What strictly legal questions or points were they forced to accept? If they were so intimidated and were under such duress, what did the Tarus and more so their lawyer do to prevent those from occurring? Better still what stopped them from asking for time until the next day which was also fixed for this mediation so they could think things through and if need be refuse to sign the agreement? This and many more questions remain unanswered.
22. Further, the lead mediator in this case, Mr. Callum Campbell is an experience mediator. He has been involved with the judiciary’s mediation training programs as one of the lead trainers providing training, assessment and accreditation for our mediators. I am not aware of any prior bad mediator conduct record against Mr. Campbell’s name in PNG, Australia where he comes from and or elsewhere. The statement or allegation that the Tarus were “being told in no uncertain terms by the mediator that there was no way they could be successful if the matter proceeded to trial and according to mediator that may have been the reason why the matter was referred for mediation so as to avoid unnecessary cost”, does not sound like one coming from a mediator of Mr. Campbell’s experience, skill and knowledge and standing as a mediator. This part of the Tarus allegations is also not in the first person by way of quoting exactly what was said to them. We are left in the dark as to what exactly did the mediators say to the Tarus. This part of the allegation concerns one of the simplest rule mediators have to follow, which is not to be judgmental and provide legal opinions or advise. It also contradicts with counsel for Pacific MMI’s recollection of what transpired at the mediation which is clear from the following part of counsel’s submission:
“Notwithstanding the above, the plaintiff’s claim of duress cannot prevail as during mediation intake the mediator had informed parties about the practice and procedure of mediation which include among others:
(a) how participants may withdraw from ... the mediation process at any time should they feel threatened or intimidated;
(b) that participants are not required to reach an agreement; and
(d) the opportunities for separate communication with the participants and or with their legal representatives.”
23. The Tarus are completely silent on their attempt at exercising any of their rights as were outlined to them by the mediator. The lack of any such evidence and a reasonable explanation for not adducing such evidence means in my view they simply failed to take such steps may be because there was no need for such steps to be taken. As noted, no evidence disclosing what exactly was said or done which establishes the claims of intimidation, duress and the rest is before the Court. Consequently, the Tarus claims remain only claims or allegations without any factual basis and without any merit.
24. The above finding renders any detailed consideration and determination of the objections noted in paragraph 16 of this judgment unnecessary. However, for completeness, I quickly point out that, the objections based on grounds of submissions, opinions and conclusions are valid and I uphold those objections. As for those based on Rule 13 of the ADR Rules, the lack of clarity in the allegations of the Tarus makes it difficult to consider the application of the provisions of Rule 13 in this particular matter other than to point out that this particular Rule exists.
25. The existence of this rule in association with r. 12 of the ADR Rules signifies that, where the parties have executed a written agreement they have effectively agreed that the agreement is in order and there is no valid reason to withhold an execution of the agreement. If all the parties were legally represented at the time, that strengthens its validity and hence its enforceability. The rules against the admission of extrinsic evidence to contradict a written agreement may even operate against a party trying to opt out of a mediated agreement. Rule 13 concerns and reinforces the need to maintain confidentiality in mediation as provided for in r. 11 of the ADR Rules. Combining all of these, including the provisions of rr. 11, 12 and 13, it is clear that, unless the parties otherwise agree, they are precluded from adducing into evidence any matter other than only the mediated agreement. This is understandable given that the parties are always at liberty to decide against the execution of any mediated agreement and walk away or defer doing so to a later time for very good reason. If they fail to take that option when they should, they would be precluded by their own conduct from later raising issues they should have raised prior to the signing of any agreement. This is not a new concept to the Court and those who might be mediating under the shadow of the Court in court annexed mediation. There must be confidence in the court annexed mediation process to deliver a durable or lasting outcome after the outlaying of much time, effort and resources to enable the parties to reach a resolution of their dispute. This accords well with the principle that there must be finality in litigation.
26. Having regard to all of the above, the first and second questions can only be and are answered in the negative. This renders any consideration of the third question unnecessary. That leaves only one matter to deal with. That concerns the Tarus trying to make a point about the mediators allowing strictly legal arguments to prevail and cause them to forego theirs.
Legal points, arguments or positions
27. The Tarus as noted claim that they were forced to accept certain strictly legal positions or forego certain of their unspecified contentions. This requires a consideration of what this case was all about. As noted already, the case arose out of an unlawful termination which had a flow on effect on a mortgage the Tarus gave the NIC. The Tarus claim that NIC did nothing about the mortgage but the Defendant’s defence is clear. There was a mortgagee sale for which purpose the Tarus were forced to give vacant possession by an order of the Court. The Tarus appealed against that order only to have it withdrawn. Consequently, those proceedings conclusively ended any claims of interest or title in the property by the Tarus. This gives rise to the common law based legal defence of res judicata in favour of the Defendants. The issue of unlawful dismissal and chattels affected by the mortgagee sale was also resolved according to the Defendants by a Deed of Release in exchange for a sum of K83, 945.92. The Tarus make no mention of these things in their claims, evidence and submissions. In these setting, I conclude that the Tarus have no basis to argue against the Defendants position that these parts of the Tarus’ claims were settled.
28. Finally, I turn to the reliefs the Tarus are seeking and note that the main relief they are seeking is restoration of the title to the property in them. That relief cannot be granted for the simple reason that, the title has transferred to two different persons after the mortgagee sale to Mr. Smith. The subsequent title holders are not named in the proceedings and no fraud or anything close to it is alleged against them. The law is clear, according to the doctrine of indefeasibility of title, persons who subsequently acquire title even if it is from a fraudster without knowing or being a party to the fraud, acquires a valid title free from all except for anything as may be registered or noted on the title. In order to succeed in a claim based on fraud, it must be brought home to the registered title holder.
29. There appears to be two lines of authorities on the question of fraud. One led by the decision of the Supreme Court in Mudge v. Secretary for Lands[13] and the other led by the decision in Emas Estate Development Pty Ltd v. John Mea & Ors.[14] Its later decision in PNG Deep Sea Fishing Ltd v Luke Critten,[15] the Supreme Court discussed these two lines of authority and concluded:
“22. A careful reading of these authorities make it clear that the Supreme Court in Koitachi distinguished the decision in Emas merely by reference to the difference in the facts, namely the fact of forfeiture of title vested in one person and being vested in another rather than the principles enunciated in that case. The Supreme Court in Emas, took into account the process leading to the decision to forfeit title in one person and vesting it in another and said, if forfeiture and transfer of title takes place in circumstances that are so unsatisfactory, irregular or unlawful, that amounts to fraud then title ought to be upset. Hence, in our view, the principle enunciated in Emas stands.
....
24. In our view, sense can be made out of the decision in Mudge and Kotachi on the one side and Emas on the other. The decision in Mudge and Kotachi could work well with one complimenting the other. Where title in certain property has passed a number of hands and or a considerable period of time has passed and is hard to trace back what has happened, the need to bring fraud home to the eventual title holder is sensible and could apply. However, where title in a property has not passed hands or the circumstances leading to either grant or transfer of title can easily be traced and established, the requirement to bring fraud as determined by Mudge and Koitachi home to the eventual title holder may be inappropriate. The title holder knowing this position of the law may well have deliberately or by his conduct facilitated a breach or otherwise a failure to follow all relevant processes and requirements for a proper, fair, and transparent grant or transfer of title over State Leases, which may fall short of fraud as held by Mudge and Koitachi to gain from his own illegal, improper, unfair and questionable conduct. This would no doubt run into conflict with well established principles of law which say that, no one can be permitted to gain from his or her own illegal conduct.... Against such possibilities, Emas does make sense.”
30. In the case before me now, there is no mention of fraud either in the wider or the narrower sense as discussed in the above authorities. That is the situation in the Tarus’ pleadings, evidence or submission as against the two different persons who had since acquired title after the sale and transfer of the property to Mr. Smith.
31. In summary, the Tarus claims of strictly legal arguments being permitted against them and them being denied of their legal positions or contentions favouring them cannot be sustained for three reasons. Firstly, there is no clear identification of all or any of the legal arguments or points against and for them. Secondly, there is a complete lack of demonstration in any manner and form the likelihood of the Tarus succeeding on each of the unidentified legal points. Third and finally, I identified the possible legal points and find those legal points operate against the Tarus succeeding in their claims against the Defendants. Ultimately, I find that the Tarus have not established their basis for any of their claims and or submissions. Their motion must therefore fail has having no factual or legal foundation for it. That must happen with costs against them.
Application for enforcement of mediated agreement
32. This leaves the Court to deal with Pacific MMI’s application for an enforcement of the mediated agreement. Rule 12 of the ADR Rules is relevant and is applicable here. The provision reads:
“12. Enforcement.
(1) Where in the course of a mediation, the parties agree on a resolution of all or part of the proceedings, the agreement shall be written down and signed by or for each party.
(2) Any party to a mediation conducted by a mediator may apply to the Court for an order giving effect to an agreement reached during the mediation by:
(a) notice of motion if the proceedings are current; or
(b) Originating Summons if the proceedings have been concluded.
(3) Subject to sub rule (2) an agreement reached during the mediation shall have the same force and effect, and may be enforced in the same manner, as if it were an agreement reached otherwise than during mediation.”
33. The first time, a situation has arisen for a consideration and application of the provisions of this rule was in Hargy Oil Palm Ltd v. Ewasse Landowners Association Inc.[16] In that context I observed:
“All agreements arrived at mediations are legally binding and enforceable, provided the essential elements of a valid contract are present. What then are the essential elements of a valid contract? A quick perusal of the relevant authorities ... reaffirms and brings out clearly the following as the essential elements of a legally binding and enforceable contract:
(1) a clear offer and acceptance;
(2) an intention to create a legally binding contract;
(3) passage of valuable consideration each way; and
(4) Each of the parties has the legal capacity to negotiate and enter into a contract.”
34. I went on to observe that:
“Generally, an agreement of the parties that meets these essential elements would qualify to be a legally binding and enforceable contract. In certain cases however, even where these essential elements are present, some contracts can be invalidated or nullified in certain known circumstances. Various authorities on contract law specify the following circumstances in which a contract could be nullified or invalidated:
(a) there is a failure to meet statutory requirements in cases where the contracts are regulated by statute;
(b) the agreement is to commit a crime or commit an act that is illegal such as an agreement to carry out a bank robbery;
(c) there has been fraudulent misrepresentation in some material respect at the negotiations which eventually leads to an agreement;
(d) the terms of the contract are unreasonable and unfair; and
(e) there has been use of force and or duress to obtain or secure the contract.
...It should clearly follow therefore that, unless a party is able to make out a case under anyone or more of these known grounds, they would be bound by the terms of their agreement. Hence, any action taken by any party against the clear terms of an agreement would no doubt, amount to a breach of contract. That would of course entitle the other innocent party to go for an appropriate enforcement of the contract.”
35. In the same case, I gave consideration to how mediated agreements can be proven and said this on the subject:
“In cases where parties have reached an agreement and the terms of their agreement are reduced into some form of written record, no extrinsic evidence can be called or allowed. Instead the document is allowed to speak for itself.”
36. I then referred to the decision of the Supreme Court in Shell Papua New Guinea Ltd v Speko Investment Limited and Peandui Koyati[17] which restates this principle with its exception in these terms:
“If parties have wholly reduced their agreement into a written contract, extrinsic evidence should not be permitted to be admitted into evidence to elicit the intention of the parties evidenced by the terms of the contract. The key word here is ‘if’. If the parties have wholly reduced their agreement into the written contract, extrinsic evidence is not permissible. However if they have not wholly reduced their agreement into written contract, extrinsic materials are admissible.”
37. Here there is no contest that the parties reached an agreement. The terms of the agreement were reduced into writing. A copy of that is annexure “G” to the affidavit of Kenneth Imako sworn on 27th and filed on 28th May 2014 for Pacific MMI. The agreement was for the Tarus to discontinue this proceeding within seven (7) from the date of the mediated agreement, namely 23rd April 2014 and pay the Defendant’s costs. The Tarus as noted, tried to opt out of the agreement through their now failed application. This means, there is no impediment to a grant of the relief the Defendants seek in their motion filed on 28th May 2014. Accordingly, I will make orders in those terms.
38. Before closing, I turn to the final matter of the “bad faith” certificate issued against the Tarus’ lawyers. A copy of the relevant certificate is annexure “K” in Mr. Kenneth Imako’s affidavit sworn on 27th and filed on 28th May 2014. The basis for that certificate is a failure of the Tarus to pay their share of the external mediator, Mr. Callum Campbell’s fees. Again in the Hargy Oil Palm case, I discussed what amounts to “bad faith” and the possible consequences that should follow against a party acting in “bad faith”. I outlined the duties of parties and pointed out that a failure to discharge their duties could amount to “bad faith.” One of the duties I pointed out was the parties’ duty to discuss with an external mediator his or her fees, when and how they will be paid. In case I did not make it clear earlier, I add that, this duty also entails a duty to promptly pay a mediator’s fees in the amounts and manner agreed.
39. If a non payment of a mediator’s fee leads to a mediation not proceeding within the terms of the orders referring the matter to mediation, a “bad faith” certificate should issue and penalties should be imposed against the defaulting party. Depending on the nature and the circumstances surrounding the breach, the Court could either enter final judgment against the defaulting party or stay the proceedings. If there is a stay of proceedings, that should be until the agreed costs and the costs thrown away in preparing for and attending at the failed mediation for the innocent party and that of the mediator are paid in full. If however, the bad faith has not prevented the mediation from proceeding and the parties have reached an agreement, as in this case, the agreement can be enforced. At the same time, the Court can order by way of a judgment for an immediate payment by the defaulting party his share of the mediator’s fees and make such other orders as the Court considers appropriate to ensure the fees are paid. Costs of getting to such judgment should of course follow that event and added to the judgment sum until the judgment sum is fully recovered.
40. In this case, the parties proceed with the mediation and reached an agreement, which agreement is now cleared for enforcement. The enforcement should take place without waiting for a resolution of the mediator’s fees issue. The Tarus’ share of the mediator’s fees constituted a debt. The agreed amount was AUD$5,500.00. They could now become the subject of a judgment for the mediator against Ketan Lawyers initially who undertook to pay the mediators fees. Ketan Lawyers could of course seek to get themselves reimbursed by their clients. However I consider it appropriate that, Ketan Lawyers should be first heard on this point before there can be any final judgment. I will allocate a date for that purpose following this decision.
41. Finally, taking into account all of the above, I make the following orders:
_________________________________________________
Ketan Lawyers: Lawyers for the Plaintiffs
Allens Lawyers: Lawyers for the Defendants
[1] Affidavit of Andrew Gogo sworn on 23rd October and filed on 1st November 2013.
[2] Para 3.
[3] Para 4.
[4] Para 5.
[5] Para 6.
[6] Para 8
[7] Para 19
[8] Para 20.
[9] (2006) N3050.
[10] See for example the decisions in Rage Augerea v The Bank South Pacific Ltd (2007) SC869 and Mount Hagen Urban Local Level Government v Sek No. 15 Ltd (2009) SC1007
[11] http://www.businessdictionary.com/definition/intimidation.html
[12] (2002) SC685.
[13] [1985] PNGLR 387.
[14] [1993] PNGLR 215.
[15] (2010) SC1126.
[16] (2013) N5441.
[17] (2004) SC 767.
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